rediff.com

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News 
Rediff.com  » Business » Why space start-ups find it hard to raise funds

Why space start-ups find it hard to raise funds

September 11, 2018 08:52 IST

While industry is upbeat, start-ups in the space sector are finding it difficult to cater to the demand due to a lack of funding, issues related to policy like foreign funding, intellectual property, etc, and a lack of support in testing.

Photograph: Reuters

Start-ups in the space sector are finding it difficult to raise funds despite the industry being bullish about growth prospects.

Since 2000, over $18 billion has been invested in start-ups globally, of which $2.7 billion was invested last year alone.

Investors are bullish about the market which is expected to increase to $1 trillion from $339 billion as demand for satellites and launch vehicles grows, especially from the commercial satellites market.

 

The Indian Space Research Organisation has called for private participation to boost its satellite-launching credentials in the global market and to support 59 upcoming satellite and 40 rocket launches, worth Rs 105 billion, in the next three years.

While industry is upbeat, start-ups in the space sector are finding it difficult to cater to the demand due to a lack of funding, issues related to policy like foreign funding, intellectual property, etc, and a lack of support in testing.

Photograph: Getty Images
NavIC to hit the market next year

India's own satellite-based positioning system NavIC (Navigation with Indian Constellation), similar to the Global Positioning System (GPS), is likely to become commercially implemented from 2019.

The chips to be used for this is expected to be ready in next six months, according to senior officials of Isro.

Isro has been calling for tenders to start its implementation. It could be used in navigation services such as in mobile phones and navigation gadgets in vehicles, etc.

It is designed to provide accurate position information service to users in India as well as the region extending up to 1500 km from its boundary.

They pointed out that India doesn't have an incubation initiative, unlike in the US, the UK, Europe and Japan where a number of initiatives have been taken up by respective space agencies and venture capital (VC) firms to back start-ups in this space.

Srinath Ravichandran, one of the promoters of AgniKul Cosmos -- which is focused on building an orbital class nano satellite launch vehicle -- said there are three fundamental obstacles to raising funds.

The VC market in India focuses mostly on tried and tested software app variants and an aerospace hardware start-up is not even in the mandate of most of the VC funds.

PE-VC Investments in Aerospace Companies

Company Investors Amount US$M Date
Exseed Space Exseed Electronics Fund (Mahesh Murthy) N.A* Apr-17
Pinaka Aerospace Solutions KITVEN 0.6 Dec-15
Team Indus Nandan Nilekani, Others 1.5 Mar-15
Maini Global Aerospace Undisclosed 10 Nov-11
Mahindra Aerospace Kotak PE N.A* April-10
Trusted Aerospace & Engg. Subhkam Ventures N.A* Dec-07
HAL Edgewood Technologies Edgewood Ventures 0.35 March-07

Photograph: Kind Courtesy, Team Indus/ Facebook

"In general VC firms are cautious about investing in sectors where the government and government agencies tend to be the buyer, though there are exceptions," said Arun Natarajan, chief executive officer of Venture Intelligence, a research firm keeping track of private companies' financials and transactions such as private equity (PE), VC investments.

"This is primarily because of payment-related issues. Having said that there are defence start-ups which have got funding. Whether it will be to the levels of investment attracted by the e-commerce or fintech? It is doubtful," he added.

Photograph: Thomas Peter/Reuters

Based on data, investments into the segment -- including into aerospace start-ups and the investment of Infosys Co-founder and Non-executive Chairman Nandan Nilekani into Team Indus -- is just over $12 million from March 2007, according to the research firm. The amount invested in some of the deals was not revealed.

Start-ups said getting foreign money is complicated due to security issues and sharing sensitive information. High Networth Individuals in India find it hard to comprehend that the start-ups have enough credibility to build a rocket.

T E Narasimhan in Bengaluru
Source: